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15 Oct 2013 16:32
Consumer indebtedness has increased. (Gallo)
Consumer spending has slowed down and worsened in the past few months, Massmart chief executive Grant Pattison said on Tuesday.
"The pressure on consumers is increasing and it seems to be related to energy inflation and unsecured lending being pulled back," he said. He was speaking on the sidelines of the Consumer Goods Council of South Africa summit in Johannesburg.
The council's chief executive, Gwarega Mangozhe, said South Africa was not immune to what was happening to the international economy, and this was affecting spending.
He said South Africans would need to practice discipline to avoid being over-indebted.
"South Africans by nature are very, very resilient, but of course the level of economic crisis that we are currently undergoing is unprecedented and this requires significant levels of discipline from a spending perspective.
"The rising levels of indebtedness, rising levels of debt and pressure on disposable income, puts consumers under significant pressure," said Mangozhe.
He said this meant business had to operate in an environment that was competitive, because the larger retailers were taking over and putting more pressure on smaller businesses.
An emerging economy was largely driven by consumer spending, and if consumers were under pressure it would put a halt on economic growth, he warned.
Mangozhe said the debt levels of South African consumers were high. "Servicing of this debt is increasingly becoming a problem and a lot of consumers are taking up personal loans which are not being used for long-term investments, but are used for short-term spending and this is a challenge," he said.
South African consumers were becoming aware of the need to discipline themselves when it came to spending.
Speaking about the relationship between the government and business, Mangozhe said it would always be dynamic, but needed to be managed because one could not do without the other.
"Government is there to provide large-scale infrastructure, and business is there to employ and also contribute towards the taxbase," he said. "So we cannot live in a utopia where we say one can't do without the other. So it is certainly a case where we need to learn to work together."
Pattison said South Africans had a history of shopping over the Christmas period, but that the pressure might affect shopping this year.
With consumer debt higher than normal, he urged consumers to be disciplined when shopping and to do research to ensure they were getting quality for the best price.
Mangozhe told the summit global economic problems were affecting South African consumers and businesses. "South Africa is experiencing its own significant socio, political [and] economical challenges.
"The environment is complex, it is fast-paced with tension and uncertainty." Problems included increased pressure from global competitiveness, less effective economic growth, consumer debt, and unemployment. Speaking about the role of the Consumer Goods Council of South Africa, co-chairperson Pattison said the organisation was co-ordinating industry standards and access-control, and was working with the police to fight organised crime.
The organisation would help set up industry standards in the supply chain, he said.
Coca-Cola Southern Africa president Therese Gearhart told the summit that government, business and civil society need to work together to achieve sustainable growth and that South Africans did not trust business and government.
"We can become the most powerful force for creating sustainable growth and shared value," she said.
"Consumers and the public have a lot of mistrust, not just in business but also in government. So a lot of what we are doing comes with mistrust and that is why close collaboration is needed to achieve sustainable growth and shared value."
Local and international speakers will address the summit, which takes place on Tuesday and Wednesday, on energising the industry and building sustainable businesses. – Sapa
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